The key points coming out of the recent advisor meeting with HMRC discussing the application of the SAO and Tax Strategy rules are summarised below:
- Penalties for SAO remain at a consistent level to previous years. There were 136 in 2017/2018 and 2/3 were for failure to notify, 70 have been levied so far in 2018/2019 with 4/5 for failure to notify.
- HMRC will focus on trying to make sure any penalty levied for careless behaviour involves asking whether the SAO certificate was clean and the main duty met. For example it is now a requirement (penalty checklist) that SAO main duty is considered when a tax error has been identified. Clients having formalised and documented governance will help mitigate tax geared penalties.
- HMRC will continue to focus on training of CCMs to improve consistency in review of SAO documentation but the Business Risk Review (BRR) pilot is expected to greatly improve consistency in this area with more specific guidance for CCMs and customers on which documentation indicates good governance and low risk behaviour.
- Following a successful pilot in the North East an SAO database is being compiled and nudge letters will be sent to every company in large business to remind of the SAO obligation, these nudge letters are generic and meant to remind only. This will happen over the next 6 months.
- Tax strategy - HMRC's main goal of increasing tax transparency is considered to have been largely met. HMRC acknowledge the substance that sits behind the tax strategy is the important question to explore with groups, and this is set to be addressed as part of the BRR pilot. Tax strategy guidance is delayed due to nuances in the way the legislation is written meaning re-drafting elements of the legislation was being considered, legislative change is now unlikely to happen so guidance can and will be finalised.
For more information contact Andy Olymbios (Partner), Giovanni Bracco (Partner), Ray Farnan (Director), Don Morley (Director), Becky Rodwell (Senior Manager), Richard Anderson (Senior Manager) or James May (Senior Manager).